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Looking Past Options Trading Indicators

Posted by Pete Stolcers on January 8, 2010

Option Trading Question

Aside from the usual trading indicators, what else should I be watching for?

Option Trading Answer

In options trading, indicators play a very important role in the trading methodologies of both professional and retail options traders. Although they do have an important part in trading success, it is important not to put too great of an emphasis on the usage of indicators. Many traders use them to give what they think is an edge over the market and many times rely on them too much. In option trading, you need to keep an eye on the indicators but also have the ability to look past them. Indicators can create a false sense of security. Almost every options trader keeps an eye on the indicators so you know exactly the same things as everyone else.

Indicators can add immense value if you use them appropriately. First of all, take a good look at what the support and resistance levels are to help make your main decisions. These should be the core of your options trading decisions. The indicators should be used as more of an accessory to decision making.

Using the support and resistance approach to trading will greatly simplify the way you trade. When you focus on price based support and resistance which includes swing lows, day highs and day lows along with volume based confirmation known as volume profile, you get the best odds possible for your trading. However you decide to use the indicators, just make sure that you don`t put all of your faith in them because they can very quickly lead you astray.

A good options trader will use the indicators as a basic guideline but also consider all the other factors that go into options trading. Always remember to do as much research as you can and know everything you can about the option trading you are about to do. It will save you time and money in the long run and significantly lower your risks in options trading.

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